What do we know about Bitcoins?
- Satoshi Nakamoto is a pseudonym for a person or persons unknown who wrote the technical specifications that serve as the system’s base code, Nicholas Colas, Chief Market Strategist at ConvergEx, said in a research note.
- Bitcoin records, or the “block chain,” resides on thousands of servers around the world. Every ten minutes, the whole system updates records of recent transactions. “No one government, or even 100 governments, can ‘shut down’ bitcoin or establish uniform regulations for the currency,” Colas added.
- Creating, or “mining,” bitcoins requires time and money. Cryptographic puzzles need to be solved during a 10 minute window and the answer has to be delivered to everyone else int eh system. If the task is done, you receive 25 new bitcoins. “The bitcoin ecosystem is dominated by very proficient computer programmers and hardware designers, but even as they improve the speed and efficiency of their servers the universe of available bitcoins still only grows by 25 units every 10 minutes,” Colas said.
- Many view bitcoins as a disruptive currency since a user can transfer the money anywhere without paying wire or banking fees. “The bitcoin ecosystem is more efficient than the currency global banking system for money transfers since the process of managing the block chain incentivizes bitcoin miners to keep the system operating, rather than the banking system’s user fees,” Colas said.
Bitcoins started the year at $13.55 and traded at $141 at last check Tuesday, a 940% increase year-to-date. The currency experienced a boom-and-bust in April where the Bitcoin surged to $266 and plunged to as low as $70.80 in a few days. [Is a Bitcoin ETF Next?]
Basic demand and supply fundamentals favor the asset.
“Volume trends were fairly consistent through the year, so the increase in price
came from steady demand and little incremental supply from sellers,” Colas said.
The future of a viable ETF option will depend on the bitcoin itself. If more accept the asset as real currency alternative, the more likely an ETF will be able to come out. [Bitcoin ETF Faces Doubts Within Industry: Report]
For more information on the ETF industry, visit our current affairs category.
Max Chen contributed to this article.